Question 1

Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.

Accepted Answer

A) True 
 B)False

Question 2

Mr.and Mrs.Pointer,ages 45 and 46,each contributed the maximum $6,000 to their traditional IRAs.Each spouse actively participates in an employer-sponsored qualified retirement plan.Compute the deductible IRA contribution on their joint return if their AGI before such deduction is $111,970.

Accepted Answer

A) $110,000 
B) $6,034 
C) $6,618 
D) $0 
A) $110,000 
B) $6,034 
C) $6,618 
D) $0

Question 3

An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.

Accepted Answer

A) True 
 B)False

Question 4

The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.

Accepted Answer

A) True 
 B)False

Question 5

Mrs.Soon retired at age 68 and withdrew the entire $77,100 balance from an IRA to buy a sailboat.She opened this account in 1999.Which of the following statements is false?

Accepted Answer

A) If the account is a Roth IRA,none of the withdrawal is taxable. 
B) If the account is a traditional IRA to which Mrs.Soon made $32,000 nondeductible contributions,$45,100 of the withdrawal is taxable. 
C) If the account is a traditional IRA funded entirely with deductible contributions,the entire $77,100 withdrawal is taxable. 
D) None of the above is false. 
A) If the account is a Roth IRA,none of the withdrawal is taxable. 
B) If the account is a traditional IRA to which Mrs.Soon made $32,000 nondeductible contributions,$45,100 of the withdrawal is taxable. 
C) If the account is a traditional IRA funded entirely with deductible contributions,the entire $77,100 withdrawal is taxable. 
D) None of the above is false.

Question 6

Mr.Thano,age 47,withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding.Compute the tax cost (and premature withdrawal penalty,if applicable)of the withdrawal if Mr.Thano has a 37% marginal tax rate on ordinary income.

Accepted Answer

A) $2,200 
B) $8,140 
C) $10,340 
D) $11,000 
A) $2,200 
B) $8,140 
C) $10,340 
D) $11,000

Question 7

Which of the following statements regarding employee versus independent contractor status is false?

Accepted Answer

A) The determination as to whether a worker is an employee or an independent contractor is based on a subjective set of guidelines. 
B) An employer has a financial incentive to classify a worker as an independent contractor instead of an employee. 
C) The IRS has a higher probability of collecting income and payroll taxes from an independent contractor than from an employee. 
D) If the IRS reclassifies a worker from independent contractor to employee,the employer can become liable for the employee's share of unpaid payroll taxes. 
A) The determination as to whether a worker is an employee or an independent contractor is based on a subjective set of guidelines. 
B) An employer has a financial incentive to classify a worker as an independent contractor instead of an employee. 
C) The IRS has a higher probability of collecting income and payroll taxes from an independent contractor than from an employee. 
D) If the IRS reclassifies a worker from independent contractor to employee,the employer can become liable for the employee's share of unpaid payroll taxes.

Question 8

This year,Haven Corporation granted a nonqualified stock option to Olivia to buy 5,000 shares of Haven stock for $20 for five years.At date of grant,Haven stock was selling on the Nasdaq for $19 per share.For financial statement purposes,Haven recorded $16,500 compensation expense for the estimated value of the option.
a.How much income must Olivia recognize as a result of the grant of the option?
b.Can Haven deduct the $16,500 compensation expense on this year's tax return?
c.Assuming a 21% tax rate,compute Haven's deferred tax asset or deferred tax liability (identify which)resulting from the $16,500 compensation expense.

Accepted Answer

a.$0.b.No.c.$16,500

Question 9

This year,Mrs.Pike's compensation from her corporate employer consisted of $325,000 current salary and $75,000 unfunded deferred compensation payable upon her retirement at age 66.Which of the following statements is true?

Accepted Answer

A) This year,Mrs.Pike must include $400,000 in gross income,and her employer is allowed a $400,000 deduction. 
B) This year,Mrs.Pike must include $325,000 in gross income,and her employer is allowed a $400,000 deduction. 
C) This year,Mrs.Pike must include $400,000 in gross income,and her employer is allowed a $325,000 deduction. 
D) This year,Mrs.Pike must include $325,000 in gross income,and her employer is allowed a $325,000 deduction. 
A) This year,Mrs.Pike must include $400,000 in gross income,and her employer is allowed a $400,000 deduction. 
B) This year,Mrs.Pike must include $325,000 in gross income,and her employer is allowed a $400,000 deduction. 
C) This year,Mrs.Pike must include $400,000 in gross income,and her employer is allowed a $325,000 deduction. 
D) This year,Mrs.Pike must include $325,000 in gross income,and her employer is allowed a $325,000 deduction.

Question 10

Vernon Inc.needs an additional worker on a multi-year project.Vernon could either hire an employee for a $72,000 annual salary or engage an independent contractor for a $75,000 annual fee.If Vernon's marginal income tax rate is 21%,which option minimizes the after-tax cost of obtaining the worker?

Accepted Answer

The independent contractor option is the

Question 11

Which of the following statements regarding fringe benefits is false?

Accepted Answer

A) The general rule is that an employee fringe benefit is taxable unless the benefit is specifically excluded from the employee's gross income. 
B) Employers are not allowed to deduct the cost of nontaxable employee fringe benefits. 
C) Nontaxable fringe benefits must be provided to employees on a nondiscriminatory basis. 
D) None of the above is false. 
A) The general rule is that an employee fringe benefit is taxable unless the benefit is specifically excluded from the employee's gross income. 
B) Employers are not allowed to deduct the cost of nontaxable employee fringe benefits. 
C) Nontaxable fringe benefits must be provided to employees on a nondiscriminatory basis. 
D) None of the above is false.

Question 12

Lawrence is a U.S.citizen who has worked in his employer's Paris office for the past five years.Compute Lawrence's 2019 AGI if his only item of income was his $130,000 salary.

Accepted Answer

A) $130,000 
B) $105,900 
C) $24,100 
D) $0 
A) $130,000 
B) $105,900 
C) $24,100 
D) $0

Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.

Mr.and Mrs.Pointer,ages 45 and 46,each contributed the maximum $6,000 to their traditional IRAs.Each spouse actively participates in an employer-sponsored qualified retirement plan.Compute the deductible IRA contribution on their joint return if their AGI before such deduction is $111,970.

An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.

The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.

Mrs.Soon retired at age 68 and withdrew the entire $77,100 balance from an IRA to buy a sailboat.She opened this account in 1999.Which of the following statements is false?

Mr.Thano,age 47,withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding.Compute the tax cost (and premature withdrawal penalty,if applicable)of the withdrawal if Mr.Thano has a 37% marginal tax rate on ordinary income.

Which of the following statements regarding employee versus independent contractor status is false?

This year,Mrs.Pike's compensation from her corporate employer consisted of $325,000 current salary and $75,000 unfunded deferred compensation payable upon her retirement at age 66.Which of the following statements is true?

Vernon Inc.needs an additional worker on a multi-year project.Vernon could either hire an employee for a $72,000 annual salary or engage an independent contractor for a $75,000 annual fee.If Vernon's marginal income tax rate is 21%,which option minimizes the after-tax cost of obtaining the worker?

Which of the following statements regarding fringe benefits is false?

Lawrence is a U.S.citizen who has worked in his employer's Paris office for the past five years.Compute Lawrence's 2019 AGI if his only item of income was his $130,000 salary.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 15: Compensation and Retirement Planning

Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.

Mr.and Mrs.Pointer,ages 45 and 46,each contributed the maximum $6,000 to their traditional IRAs.Each spouse actively participates in an employer-sponsored qualified retirement plan.Compute the deductible IRA contribution on their joint return if their AGI before such deduction is $111,970.

An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.

The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.

Mrs.Soon retired at age 68 and withdrew the entire $77,100 balance from an IRA to buy a sailboat.She opened this account in 1999.Which of the following statements is false?

Mr.Thano,age 47,withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding.Compute the tax cost (and premature withdrawal penalty,if applicable)of the withdrawal if Mr.Thano has a 37% marginal tax rate on ordinary income.

Which of the following statements regarding employee versus independent contractor status is false?

This year,Mrs.Pike's compensation from her corporate employer consisted of $325,000 current salary and $75,000 unfunded deferred compensation payable upon her retirement at age 66.Which of the following statements is true?

Vernon Inc.needs an additional worker on a multi-year project.Vernon could either hire an employee for a $72,000 annual salary or engage an independent contractor for a $75,000 annual fee.If Vernon's marginal income tax rate is 21%,which option minimizes the after-tax cost of obtaining the worker?

Which of the following statements regarding fringe benefits is false?

Lawrence is a U.S.citizen who has worked in his employer's Paris office for the past five years.Compute Lawrence's 2019 AGI if his only item of income was his $130,000 salary.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters